August 2009 Vol. 2, No. 8
 

Underwriters' Bulletin

Claims Corner

Exception Language

Special Exceptions on Commitments and Policies Should be Specific

Exceptions from coverage on a commitment or policy must be specific enough to give notice of the nature of a restriction on title. ATG recently suffered a significant claim loss that was the result of a policy that contained only a general exception for specific restrictions on title. We believe this type of claim can be avoided if the language on the commitment and policy is exact and detailed.

The commitment and policy that were issued in connection with the above claim contained the following exception from coverage:

 

 

Covenants, conditions, restrictions, building lines and easements of record, if any.

 

 

 

The land insured was subject to several recorded easements and building setback lines that were not specifically excluded from coverage. The general exception listed on the commitment and policy was not specific enough to put a party on notice as to the nature of the easements and building setback lines for the insured property. One of the easements was for a sanitary sewer line. Ultimately, the sewer line had to be moved in order for an addition to the property to be approved for the building permits. ATG had liability to the insured owner for the undisclosed easements and building lines of record.

All easements, covenants, conditions, restrictions, and building lines should be specifically excluded from coverage. Issuing agents should provide as much detail regarding the restriction as possible. Following are samples of exceptions that have the required level of specificity:
 

 

Building Line: A [enter the number of feet of the setback] foot building line from the [enter direction] line of the property as shown on the Plat of Subdivision and recorded [enter the date the plat was recorded] as Document Number [enter the document number].

Covenants and Restrictions: Covenants, conditions, and restrictions contained in [describe the type of document] dated [enter date of document] and recorded [enter recording date] as Document Number [enter document number], but omitting therefrom any covenant or restriction based on race, color, religion, sex {gender}, handicap, familial status, or national origin, relating to [enter the nature of the restriction, if any].

General Easement: Easement for [enter the purpose of the easement] as set forth in [describe the document creating the easement] dated [enter the date of the easement] and recorded [enter the date the easement was recorded] as Document Number [enter document number], from [enter the person granting the easement] to [enter the name of the person(s) receiving the easement].

Public Utility Easement: Easement over and upon the [enter direction of the easement] [enter number of feet of the easement] feet of the land for public utilities and drainage as recorded [enter date of recording of easement] as Document Number [enter document number].

Prescriptive Easement: Easement in favor of the public and quasi-public utilities and the municipality over the [enter the location and feet] feet of the property as evidenced by [poles, conduits, sewers, etc.].

Party Driveway: A [enter number of feet] foot party driveway located on the property described in Schedule A and on the land [enter direction] and adjoining and all rights ensuring thereunder in favor of said adjoining land.

 

When preparing commitments and policies, issuing agents should remember that any ambiguity will typically be interpreted in favor of the insured and not the insurer. The specifics of a restriction should be disclosed when they are known or can be discovered by a review of the public record.

We encourage you to reviewATG Underwriting Handbook, Chapter 24: Special Exceptionsfor more examples of specific exceptions. You can find allATG handbookson the member section of www.atgf.com under "Publications/Notices" or in hardcopy by contacting theATG Order Department, 217.403.0114. If you have any questions about how to raise any exception, contact the ATG Underwriting Department,legal@atgf.com, 217.403.0020, or 312.752.1990.

&© ATG|Casenotes/Bulletin 0908_v2n8

[Last update: 9-2-09]

 

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